Depreciation Method of Production Unit

The amount of depreciation using the unit method of production is calculated based on each unit of production.

Formula of Depreciation Method of Production Unit

Information :
A = Cost of assets is the amount of costs incurred by the company to acquire an activation until the asset is ready to be operated.
S = Estimated residual value of the asset is the value of the appraisal that may be obtained through the assets that have passed its life.
SK = Book value at the end of year K
r = Depreciation rate or percentage depreciation
Q = Number of units
D = Depreciation expense for each period

Example Question of Depreciation Method of Production Unit

An asset at a cost of $ 25,000,000. It is estimated that the useful life of the assets for 6 years with the production amount of 10,000 units and has a residual value of $ 5,000,000. If the number of production each year is 2,500 units, 2,250 units, 2,000 units, 1,750 units, 1,000 units and 500 units, respectively. Please specify the depreciation rate of each unit of production unit!

Answer:
A = $ 25,000,000
n = 6 years
Q = 2,500 + 2,250 + 2,000 + 1,750 + 1,000 + 5000 = 10,000 units

So the depreciation rate of each unit of production unit is $2,000 per unit.

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